Smaller towns are more affected by the monsoon

So far manufacturing & service industries have been flagging in these cities, but the combination of high agricultural activity & production of commercial crops makes these towns ideal locations for processing of these agricultural products

Not everyone realizes that dependence on the monsoon is not limited to rural areas alone. Workers in many Indian cities are heavily engaged in agriculture and related activities, and for them, the monsoon will play an important role.Naturally, the smaller the town, the larger the share of agricultural dominance. As cities grow in size, agricultural land is taken over for non-farm activities, and industry and services proliferate. Metros, for example, have less than 2% of their workers in farm-related activities, and this, of course, includes fishing in Mumbai, Chennai and Kolkata.These Alpha cities have the largest market sizes, but at the other end of the spectrum are the Delta cities, a large group of 50 cities that are budding, or have the potential to turn into much larger centres. It is this group of cities that have a preponderance of labour engaged in primary sector activities. Clearly, along with the rural markets, these towns owe their income more to agriculture than to industry or service sectors, and consumer expenditures in these cities will, to a large extent, be vulnerable to the vagaries of the monsoon.

Source: City Skyline of India

Demand Curve

Source: City Skyline of India

Many of these Delta cities are steadily gaining the necessary scales in terms of population and market size. Capitals of states and Union territories, such as Gandhinagar, Srinagar and Shillong, centres that are siblings of larger cities such as Gurgaon and Noida (near Delhi), industrial centres such as Durg-Bhilai (Chhattisgarh) and Bokaro (Jharkhand), historically important cities such as Udaipur (Rajasthan) and Mysore (Karnataka), large emerging centres such as Jamnagar (Gujarat), religious cities such as Varanasi (Uttar Pradesh) and Ajmer (Rajasthan), etc.If we look at the set of Delta cities that have at least 60% of their workers engaged in the primary sector, it is curious that they lie geographically almost totally in the south-central belt of the country; only Shimla is an exception. Durg-Bhilai, of course, is a mining centre.So far manufacturing and service industries have been flagging in these cities, but the combination of high agricultural activity and production of commercial crops, such as sugar cane, cotton, groundnut and chillies makes these towns ideal locations for processing of these agricultural products through further stages. However, these towns have not yet boomed into manufacturing centres.Purchases of many services and manufactured goods in these centres are directly affected by the performance of the agriculture sector. High-end hospitals in Gurgaon, for instance, are looking at the rural rich as an important new consumer segment to target in this era of manufacturing and services slowdown. Even the government is becoming more sensitive to the underlying economic structure.The first farmer special economic zone in the country is to be set up in Nellore district of Andhra Pradesh, and this should be a cue to other centres to develop accordingly and put in place the backward and forward linkages necessary to add value to the already existing agricultural resources within or close to urban areas.Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and markets.